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Directors and officers liability under Dutch law

Directors and officers liability in the event of bankruptcy

Directors and officers liability is a common issue under Dutch law in the event of bankruptcy. According to the Dutch law the company itself is liable for the debts incurred. In certain cases, however, the director of a company can be held personally liable in the event of bankruptcy. Then the director has to pay the debts with his private assets. The bankruptcy trustee therefore always checks whether the director is liable.

Article 2:245 Dutch Civil Code

Directors and officers liability in the event of bankruptcy is laid down in Article 2:248 of the Dutch Civil Code. According to this article a director can only be held liable if he has clearly performed his duties improperly and that this has been an important cause of the bankruptcy. For example when the director has committed a violation of the obligation to publish annual accounts or has not complied with its accounting obligations. If this is the case this irrefutably entails that the directors of the company are guilty of improper management.

A director is however not liable if he proves that he is not responsible for the improper performance of his duties and that he has not been negligent in taking measures to avert the consequences.

Determine liability

A bankruptcy trustee will always check whether the director has complied with the obligations under the Dutch law or not. As stated above it is suspected that the director is guilty of improper management if he does not publish the annual accounts on time or if he has not acted in accordance with the accounting obligation unless the director can prove the contrary. In practice, the bankruptcy trustees regularly appeal to these evidentiary presumptions. In case of directors and officers liability, the director and the bankruptcy trustee in the Netherlands are trying to reach a settlement. If this does not lead to a result the case is brought before a court. The court then determines whether there has been improper management or not.

New legislation

On January 28 2020 a proposal (wetsvoorstel Wet bestuur en toezicht rechtspersonen) was adopted by the House of Representatives of The Netherlands. On March 31, 2020, the Senate Committee for Justice and Security issued a preliminary report. For the time being it looks like this proposal will also be passed by the Senate.

Among other things, this proposal has been amended with regard to directors and officers liability. The proposal provides for a transfer of Article 2:138 and Article 2:248 of the Dutch Civil Code to Article 2:9c of the Dutch Civil Code, making it directly applicable to directors of all legal entities as referred to in Art. 2:3 of the Dutch Civil Code (associations, cooperatives, mutual insurance associations, public limited companies, private limited companies and foundations).

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